Wasendorf, The Secret Keys to Smart Investing

Most readers of this blog are probably too advanced in their investing and trading strategies to profit from Russell R. Wasendorf, Jr.’s The Secret Keys to Smart Investing: Simple Strategic Rules to Diversify and Maximize Your Investment (W&A Publishing, 2009). But they might consider giving this book as a thoughtful present to a friend or relative.

Wasendorf’s intended reader is the person who owns his own home, has a 401(k) or IRA invested in stocks, and has rainy-day cash. Moreover, after investing the maximum each year in tax-beneficial funds, he also puts some money into taxable investment accounts. And then comes the “secret ingredient.” He switches a small portion of his assets into alternative investments that seek out-sized returns and that are uncorrelated with the rest of his portfolio; this will improve the efficiency of his portfolio. That is, they will smooth out portfolio volatility and perhaps increase returns.

Among the alternative investments Wasendorf considers are collectibles, metals, currencies, commodity futures, and options. He outlines the many pitfalls of investing in collectibles, and he suggests that there are better alternatives to investing in metals than hoarding bars, ingots, or coins. He warns the reader of the presence of disreputable dealers in the forex market. And he urges the investor to seek alternative investments that are regulated, transparent, liquid, and reputable—in brief, futures and options. Wasendorf then offers the reader a primer in these two types of alternative investments.

Not surprisingly, since Wasendorf’s father is the founder, chairman, and CEO of PFGBEST, and the author is the president and COO of the firm, he makes a pitch for managed funds. PFGBEST is a brokerage firm that has expanded beyond its flagship product—futures—into forex and options trading. And, as it says on its website, its trading professionals “have created blended portfolios that are customized and managed to meet the great demand for diversification and enhanced return strategies.” But this book is not just a very long ad for the company; it is an extremely readable guide for the person thinking about including alternative investments in her portfolio.